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23.01.2025 01:12 PMOn Wednesday, the EUR/USD pair continued its upward movement and tested the resistance zone of 1.0435–1.0448. A rebound from this zone worked in favor of the US dollar, initiating a decline toward the lower boundary of the upward trend channel. A rebound from this boundary could signal a resumption of euro growth, while consolidation below the channel would indicate a shift toward a new bearish trend.
The wave situation remains clear. The last completed downward wave broke the low of the previous wave, while the latest (unfinished) upward wave has yet to break the last peak. Thus, the bearish trend continues to develop, with no signs of completion. To confirm the trend's reversal, the euro must rise confidently above the 1.0460 level and close above it within the current wave.
Wednesday's news was relatively weak, despite earlier expectations of significant updates for traders. ECB President Christine Lagarde spoke at the international forum in Davos, focusing less on monetary policy (MPC) and more on potential US tariffs on European exports. According to Lagarde, imposing tariffs is a likely move by the new US President Donald Trump, but the European Union must be prepared to respond in kind. She also noted that tariffs could drive inflation in both the US and the EU, though the threat isn't as severe as it might seem. Overall, the ECB continues to expect inflation to decline toward its target level. Lagarde emphasized the EU's interest in productive cooperation with the US and growth in the American economy.
The market did not react to these statements or to hints about continuing accommodative policies. With an even quieter news day expected today, trader activity may remain minimal.
On the 4-hour chart, the pair climbed to the 127.2% Fibonacci retracement level at 1.0436. A rebound from this level could favor the US dollar and a continuation of the decline, despite bulls managing to break above the downward channel. However, a critical resistance zone remains on the hourly chart. No emerging divergences are observed in any indicators today, and given the lack of market catalysts, I am skeptical that bulls will continue their offensive.
Over the past week, speculators closed 3,743 long positions and 7,470 short positions. Sentiment in the Non-commercial group remains bearish, suggesting further declines for the pair. The total number of long positions held by speculators now stands at 162,000, compared to 223,000 short positions.
For 18 consecutive weeks, major players have been reducing their exposure to the euro. This signifies a bearish trend with no exceptions. Occasionally, bulls dominate during individual weeks, but this is more the exception than the rule. The main driver of the dollar's decline—the expectation of FOMC monetary easing—has already been priced in, leaving fewer reasons for the market to sell the dollar. While new factors could emerge (potentially this week), the dollar's strength remains more likely. Chart analysis also points to the continuation of the long-term bearish trend. Therefore, I anticipate further declines in EUR/USD.
On January 23, the economic calendar contains only one entry. The impact of this news on market sentiment is expected to be minimal or nonexistent.
Fibonacci levels are constructed based on 1.0336–1.0630 on the hourly chart and 1.0603–1.1214 on the 4-hour chart.
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